It is standard for a contractor to warrant that its completed work is free from defects and complies with the contract documents. This warranty does not provide the project owner with indefinite protection, however. State law imposes statutory limitation periods on warranty claims. But do these limitation periods start to run when the owner first discovers defective work? Or is the period triggered only by the contractor’s breach of the warranty obligation?
The Minnesota Supreme Court recently concluded that the statutory limitation period on warranty claims started to run only when the project owner learned that the contractor was unable or unwilling to honor the warranty. The owner’s prior knowledge of the defective work itself did not trigger the limitation period. The Court reasoned that the fundamental claim was for breach of the warranty. The nature of the defective work merely defined remedies under the warranty and damages for its breach.
This raises some interesting questions for project owners and their advisors. Upon discovery of defective work, the owner can make a demand against the contractor under the warranty. If the contractor makes remedial efforts, even half-hearted ones, it has probably not yet breached the warranty. In order to perfect a warranty claim, the owner must establish contractor breach and then initiate a timely action within the applicable limitation period.
How does one document a contractor breach of warranty? Can a contractor postpone any liability through recurrent efforts at remedial work? Can a project owner unilaterally declare the contractor to be in breach of the warranty?
As always, I welcome all comments on this subject.
Featured in next week's Construction Claims Advisor:
- Site Condition Claim Defeated by Strict Written Notice Requirement
- Supplier Forced to Arbitrate Payment Claim despite Lack of Written Agreement
- Roofing Bond Not Activated Without Certificate of Final Completion
Bruce Jervis, Editor
